Market Response to Discount Domestic Air Fares

The introduction by East–West Airlines of low-cost fares on the Sydney–Melbourne and Sydney–Brisbane routes in the first half of 1983 generated considerable debate within the aviation industry. The early stages of this debate were characterised by a lack of data on the passenger response to these innovative fares. In this Paper the results of a series of four surveys and an analysis of trunk network patronage designed to assess passenger response to discount air fares are described. The work was not restricted to the response of East-West Airlines’ passengers but also included the response of passengers who travelled with Ansett Airlines of Australia and Trans Australia Airlines. One of the implications from this analysis is that a policy of minimising spillage of full fare passengers may be inconsistent with profit maximisation in the short term. Another implication is that optimal seat reservation procedures require data on the unsatisfied demand for full and discount fares.